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Internationally Active Insurance Group (IAIG)

Last Updated 4/18/17

Issue: The supervision of internationally active insurance groups, or IAIGs, has garnered considerable discussion following the 2008 global financial crisis. Insurance markets have evolved over the years to become increasingly global and interconnected. In response to the increasing globalization in the insurance sector as well as key lessons learned from the financial crisis, the International Association of Insurance Supervisors (IAIS) began developing a major project called ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups). ComFrame is a set of international supervisory requirements focusing on the effective group-wide supervision of IAIGs.

Overview: ComFrame was initiated in recognition of the growing relevance of IAIGs in the global insurance marketplace and the need for an internationally coherent framework for the supervision of large, complex, global groups. The IAIS began developing ComFrame in July 2010 to build on individual member efforts to improve group supervision and provide better insights to supervisors on how IAIGs operate.
ComFrame is built on the premise that IAIGs should be supervised in a collaborative fashion by home and host supervisors, thereby resulting in more effective and efficient supervision. It contains qualitative and quantitative requirements for IAIGs and for home and host supervisors that will foster greater cooperation and coordination among supervisors. ComFrame expands upon the high level requirements and guidance currently set out in the IAIS Insurance Core Principles (ICPs), which generally apply on both a legal entity and group-wide level.

According to the IAIS, due to their complexity and international activity, IAIGs need tailored and more coordinated supervision across jurisdictions. This necessitates a specific framework to assist supervisors in collectively addressing group-wide activities and risks, identifying and avoiding regulatory gaps and coordinating supervisory activities under the aegis of a group-wide supervisor.

What is an IAIG?
An IAIG is a term under ComFrame for insurance groups or financial conglomerates that exceed thresholds on international activity and size. The IAIS defines an IAIG as a large, internationally active group that includes at least one sizeable insurance entity. There are two criteria for an insurance group to be identified as an IAIG: 1) International Activity — premiums are written in not fewer than three jurisdictions, and percentage of gross premiums written outside the home jurisdiction is not less than 10% of the group's total gross written premium; and 2) Size —based on a rolling three-year average, total assets of not less than $50 Billion, or gross written premiums of not less than $10 Billion.

Process of Identifying an IAIG
A supervisory college is the mechanism by which an IAIG is identified. Supervisory colleges are intended to facilitate oversight of IAIGs at the group level. The IAIS defines a supervisory college as "a forum for cooperation and communication between the involved supervisors established for the fundamental purpose of facilitating the effectiveness of supervision of entities which belong to an insurance group; facilitating both the supervision of the group as a whole on a group-wide basis and improving the legal entity supervision of the entities within the insurance group."

The IAIS will not be responsible for identifying IAIGs, but will set out the criteria and process relevant supervisors will use for identifying IAIGs. As noted above, the criteria the IAIS has proposed for IAIGs are based on size and international activity, but allow a degree of supervisory discretion on whether a particular group should, or should not, be considered an IAIG. The IAIS expects that approximately 50 IAIGs will be identified by supervisors.

Insurance Capital Standard
In recent years, international insurance standard setters have focused on the development of global group capital standards. As part of these important initiatives, the IAIS is developing an insurance capital standard (ICS) which will become part of ComFrame. An initial version is due to be developed by mid-2017 and full adoption is expected by the end of 2019. The main objectives of the ICS are to protect the policyholders and to contribute to financial stability. In 2014, the NAIC decided to form the ComFrame Development and Analysis (G) Working Group to provide technical and strategic input on the ICS development, as well as ongoing review and guidance.

The ICS is a group-wide, consolidated insurance capital standard. It is not intended to replace existing arrangements or capital standards for legal entity supervision in any jurisdiction. The ICS aims to provide a comparable measure of capital across jurisdictions. Achieving comparability would help allow for a common understanding of IAIG capital adequacy, enhancing cooperation and coordination among supervisors. It would also augment the confidence in the group-wide supervisor's decisions and analysis on which all other supervisor depend.

Status: The NAIC's international involvement has been increasingly focused on strengthening the supervision of insurers that operate in multiple countries, or IAIGs. A key focus of the NAIC Solvency Modernization Initiative (SMI) project was enhancing group supervision. U.S. insurance regulators support the development of ComFrame to the extent that it results in an outcomes-focused framework that enhances supervision of IAIGs. Part of the NAIC ComFrame Development and Analysis (G) Working Group charge is to provide ongoing technical review and expedited strategic input on the IAIS ComFrame, as well as international group capital developments.